Not upheld: unfair credit relationship under Section 140A of the Consumer Credit Act 1974; connected lender liability under Section 75 of the CCA; alleged breach of Regulation 14(3) of the Timeshare Regulations; undisclosed commission complaint against Shawbrook Bank Limited

Decision detail

Summary

Mr and Mrs D purchased Fractional Club timeshare membership for £9,585 in August 2014, financed by Shawbrook Bank Limited. They complained in November 2016 alleging misrepresentation, breach of contract, and an unfair credit relationship, citing concerns about the product's marketing, the sales process, and undisclosed commission. The Lender rejected all complaints. The ombudsman found no evidence of actionable misrepresentation regarding the Allocated Property or guaranteed exit date. Although the Supplier may have breached the prohibition on marketing timeshares as investments (Regulation 14(3)), the ombudsman found this was not material to Mr and Mrs D's decision to purchase, as the prospect of financial gain was not a motivating factor. The commission of £958 (9.92% of the loan) was not sufficiently high to render the credit relationship unfair under Section 140A, and Mr and Mrs D would have proceeded with the purchase regardless of disclosure. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied a holistic approach to Section 140A, finding that regulatory breaches do not automatically create unfairness; their consequences must be considered in the round. On misrepresentation, the ombudsman found no evidence of false statements of existing fact about the Allocated Property's value or guaranteed sale date. Regarding the alleged breach of Regulation 14(3) (marketing as an investment), while acknowledging it was possible the Supplier breached this prohibition, the ombudsman found this was not causative of Mr and Mrs D's purchase decision, as the prospect of financial gain was not a motivating factor. The ombudsman attached limited weight to the 2023 witness statement raising the investment issue, noting it was provided after the Shawbrook v FOS judgment and was inconsistent with the original 2016 complaint. On commission, the ombudsman distinguished the case from Johnson on the basis that the commission (9.92% of loan, 5.42% of charge for credit) was not high, was not discretionary, and Mr and Mrs D would have proceeded with the purchase regardless of disclosure. The ombudsman found no fiduciary duty was owed by the Supplier when acting as credit broker.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website